How to fail successfully

The concept of failing fast is one we associate readily with start-ups. But if successful brands need to constantly evolve to stay successful, and presumably not every evolutionary move will be a success, how should top companies plan for when things don’t go to plan?

As one of my friends dryly observed, failure just doesn’t get the credit it should. And perhaps that’s because, while no sector is immune from failure and no brand can get it right 100% of the time, it’s still seen as a career-limiting move to have championed an initiative that didn’t work, particularly if the brand itself is established and deemed successful. That said, since every brand will fail at some point, it makes complete sense for business owners and managers to learn how to use brand failure to their advantage.

Step 1: Understand the risk profile of every initiative

I see companies regularly embark on ambitious ventures without appraising what they fully stand to gain from doing so, and what could happen to their brand and their reputation if they don’t. I always find it curious that companies don’t continue to SWOT changes in their brands because I wonder how they can make an investment decision if they have not quantified the stakes. Surely, having a sense of the chances of success and, equally, failure will inform their vigilance around in-market progress.

Step 2: Admit failure quickly, but not too quickly

Having accepted that failure could happen, and the chances of it happening, the business needs to make it acceptable for things not to go to plan. Unless it’s glaringly obvious, too few companies are willing to admit when there has been a stuff-up. If they don’t hit a number, they say the number was too ambitious. If they upset a customer, they say they did the best they could under the circumstances. If they release a product that doesn’t work, they blame market conditions or that there wasn’t enough investment in the marketing. In some cases, they’re right. In most, they’re looking to rearrange the deckchairs to make sure it didn’t look like they were there at all. To me, this is the hardest step for many businesses because it forces people to be fallible and vulnerable.

Be prepared to win as a culture and absolutely resolve to correct failures and bring a brand back from the brink of defeat if that is feasible. But equally, be prepared for things to go the other way. Just as markets go up and down, and market share can shift dynamically, failure is part of how brands naturally work and that’s OK.

Step 3: Let failure happen, but understand why it happens

Having made failure acceptable as a part of doing business, you need to quantify what success looks like and what failure is. If you want innovation to happen, you need to encourage people to step outside the current business box. Yes, that’s obvious, but it can also be very difficult in organisations that are so tightly managed they have ruled themselves to a stand-still with procedures and sign-offs that stifle new thinking. Companies need to be able to experiment, but they also need to have the metrics to know when there is failure, where the failure has taken place and why the presumptions that drove the initiative in the first place didn’t come through. In other words, tightly define failure – so that you recognise it when you see it.

Step 4: Know where you could fail

Businesses and individual initiatives can fail in a full range of ways. They can fail in terms of traction. They can fail in terms of delivery, socially, reputationally, at a product level … Professor Amy Edmondson makes the excellent point that not all failures are created equal. Furthermore, she says, because of this, organisations don’t understand how they will fail and therefore what they need to do when failure occurs. There are, she says, three categories of failure, each of which demands a different response.

Preventable failure stems from failing to follow a good process consistently. It normally applies in situations where there are high-volume or routine procedures that need to be carried out a particular way. The critical need here is knowing why a process wasn’t followed and building in ways to correct that. As Rory Sutherland once observed, there are times when he wants people to be creative and times when he doesn’t. He gives the example of the person tasked with tightening bolts. I don’t, he says, want them to decide to vary the task. Industries that have highly repetitive tasks need to ensure that everyone understands why they do what they do, the way that it is done. They also need to build correction into how they work in order to nimbly re-set when things go wrong.

Complexity-rated failure – this occurs when circumstances bring a combination of needs, people and problems together in unprecedented ways. While best-practice can mitigate these situations, there are still times when the unexpected will triumph over the best-laid plans. The secret, says Edmondson, is to see these failures as the culmination of a series of small failures. Not letting these small failures go unnoticed is the most effective way to prevent serious failures in these circumstances.

Intelligent failure – these are the failures that come with experimentation. In fact, it is only through such failures that organisations can learn what works and what doesn’t. Intelligent failures in other words help brands hone what will work from the many variants that they will try. But any brand using failure to find success needs to build setbacks and time into its go-to-market strategy.

Step 5: Report and record failures

Having accepted and defined failure, you need to document when it occurs. While every company is likely to experience more than one of the three types of failure that Edmundson identifies, the critical analysis is knowing which failure(s) is/are most likely to occur, when and why. That requires monitoring mistakes, analysing them for type, and recording what caused them and what the consequences were. That way, businesses can, over time, build an inherent understanding of where they are most prone to failure and what they stand to gain from investing to mitigate that risk.

That will only happen of course if people are encouraged to report shortcomings and missed objectives, and if they can do so in an atmosphere of trust. In her article, Edmundson refers to the concept of “blameless reporting”—where people are encouraged to speak up in order for mistakes and failures to be recognised, analysed and addressed. A recent article on the Volkswagen debacle highlights what failure to report and correct failures can end up costing a company.

Step 6: Ring-fence failure where possible

It’s one thing to define failure and to know that it is happening, it can be another to do something about it. Market traders often talk about a stop-limit. This is an order that means that when a certain price is reached, stock is either bought or sold. The intention is to contain any loss that an investor will take. Equally, companies need to put clear parameters around initiatives, with exit points that require them to immediately stop investing, to sell or abandon when that point is reached. That level could be capital invested, time in market, sales rate, customer interest or lack of it, or any of a number of other metrics. The aim is to ensure that the business operates within pre-agreed limits and to preserve the core brand asset. Having these metrics will help prevent teams from continuing to invest in futile ventures in the hope that somehow they will come right. In the case of Volkswagen, for example, the $22 billion they ended up paying in fines and legal settlements was, according to The New York Times, “far more than the cost of equipping the cars with adequate pollution control equipment in the first place.”

In today’s risk-conscious environments, many brands are reluctant to admit they have failed, publicly or even to themselves. But unless businesses are prepared to push the boundaries and introduce bold new approaches, they risk something else that can affect them even more: becoming stagnant, complacent and increasingly uncompetitive.

Smart brands use every initiative to test appetite in the market, investing where they see interest and profit, and withdrawing where ideas under-perform. To me, the acceptance of failure as a cost of business development is a sign of transition from managed (inherently passive) to explorative (active and ambitious). As long as core brand equity is preserved and there are measures in place to ensure failure is defined and a dignified exit is possible, I think it is incumbent upon every business to take risks and be adventurous. Failure shouldn’t be seen as the price of getting it wrong. In many cases, it’s the investment for making sure brands come out ahead.